Many are concerned with electricity price hikes and looming blackouts, and many are fed up with a system that prioritizes ideology and utility profits over reliability. Our electric grid is the backbone of modern life 鈥 powering hospitals, homes and businesses 鈥 but it鈥檚 being undermined by flawed policies in our organized electricity markets.
Regional Transmission Organizations (RTOs), tasked with ensuring reliable, affordable electricity, are stuck in an anti-competitive mess that favors subsidized renewables over dependable power. This isn鈥檛 just bad economics; it鈥檚 a recipe for disaster. We need bold reform to restore fairness, protect consumers and keep the lights on.
RTOs manage vast electric grids, balancing supply and demand to prevent blackouts. They procure electricity through competitive bidding, where generators submit offers to supply power. Here鈥檚 the catch: Most RTOs use a 鈥渃learing price鈥 model, paying all accepted generators the highest winning bid, not their actual bids.
Other industries don鈥檛 pay the highest bid accepted to all suppliers. They pay the offered price of each supplier they accept.
A coal or gas plant bidding with unfair rules that prevent them from using their actual costs, including profit, gets paid the same as subsidized renewables that bid lower. They are all paid the highest cost the RTO takes. This 鈥渢ake-and-pay鈥 system inflates prices, distorts markets, is anti-free market, and punishes reliable, on-demand power plants.
Wind and solar, while part of our energy mix, are intermittent, producing power only when the weather cooperates. Their capacity factors 鈥 how much power they generate compared to their potential 鈥 range from a meager 18% to 40. Yet, government subsidies and renewable portfolio standards let them flood RTO markets with low bids.
Worse, RTO bidding rules often restrict dispatchable plants 鈥 natural gas, coal and nuclear 鈥 from including facility costs, making them unprofitable. Many shut down, leaving us vulnerable to blackouts when renewables can鈥檛 deliver.
Look at Europe, where heavy renewable reliance has led to electricity rates three to four times higher than ours and frequent grid failures. Spain鈥檚 April blackout, affecting 55 million, showed what happens when grids lean too hard on weather-dependent power without enough dispatchable generation. We鈥檙e on the same path unless we act.
First, RTOs must pay generators their actual bid prices, not the highest accepted bid. Second, we must address the unfair advantage of intermittent sources. Wind and solar should receive discounted payments reflecting their lower value for keeping our lights on.
Finally, we need to fairly compensate dispatchable plants for their capacity and grid inertia. This will ensure they remain viable to meet demand when wind and solar falter. Which is often.
These changes aren鈥檛 anti-wind-and-solar; they鈥檙e pro-reliability and pro-consumer. Wind and solar can still compete, but not at the expense of grid stability or affordability. Without reform, we鈥檙e gambling with our energy future, inviting blackouts, and skyrocketing rates.
Frank Lasee is the president of Truth in Energy and Climate